Agent’s fees can consume a sizeable slice of the annual rental income for your investment property, but do they equate to money well spent?
Australia is home to 2.03 million residential property investors, according to the ATO, while property research house CoreLogic estimates there are around 2.6 million investor-owned dwellings nationwide.
One in four Australian property owners manages their own property, taking care of everything from advertising for tenants to arranging emergency repairs, according to 2018 research by Finder.
It makes sense to consider the pros and cons of DIY management versus paying a professional to handle the hassle, before deciding which approach is best for you.
Most investors who self-manage do so to save money – and the savings can be significant.
Agents’ rates vary from state to state, but investors can expect to pay anything from five to 15 per cent of the weekly rent, exclusive of GST, according to Local Agent Finder.
Most property managers also charge a letting fee – often a week’s rent – to find and vet new tenants, and marketing fees to cover advertising and promotion.
These fees are tax-deductible, but they can still add up to thousands of dollars over the course of a year.
It can mean a much higher rental yield – more money in your pocket – if you decide to take on the task yourself.
Finding time to do things properly
Self-managing can be costly, time wise. Scheduling inspections, vetting applications, signing tenancy agreements and lodging bonds with the relevant government body in your state can be time consuming, particularly if you’re not familiar with the process. If you’re already short of hours, an agent’s fees may seem cheap at the price.
Conversely, if you have a few hours to spare each month, consider yourself a fair judge of character and are comfortable with paperwork, a DIY approach may well be your thing.
Dealing with dramas
Residential property isn’t a ‘set and forget’ investment. Maintenance and repairs are a fact of life and sometimes they need to be arranged urgently. If you’re handy on the tools or have a network of trusty tradies, finding someone to repair a burst pipe at midnight may not faze you.
If not, it can be a relief to know your property manager has a 24-hour plumber on speed dial.
If you’re fortunate to score good tenants, it’s likely you’ll enjoy cordial relations, should you opt to self-manage. Bad payers or tenants who damage your property can be a different story.
If you’re comfortable dealing with conflict, chances are you’ll take any aggro in your stride. Less assertive types may prefer to maintain their distance and let a middleman deal with any dramas.
Having an agent on the job can also give peace of mind that the process has been handled correctly, should breach notices or tribunal appearances become necessary.
Understanding the market
Keeping abreast of the local market is key to maximising your property’s yield. This is important for self-managers, who can do themselves down by charging below-market rent; a common occurrence if they’re on good terms with long-term tenants and don’t want to rock the boat.
An agent who’s managing multiple properties in the area will have a handle on the rent your property can command and won’t feel uncomfortable instigating regular rises, if warranted.